Flexible Benefit Plan (FBP)

To claim the tax benefits, the following process must be followed:

1. Selection: At the start of the financial year, you select the components you wish to include in your salary.

1. Declaration: You declare the anticipated expenses for these categories.

1. Proof Submission: Throughout the year, you must submit actual bills and receipts to your employer as proof of expense.

If you fail to submit valid proofs for the amounts you declared, those specific amounts will be treated as taxable income and tax will be deducted from your salary accordingly. Note that these claims are processed by your employer and are not filed directly in your personal Income Tax Return (ITR).

Common Components of FBP

Given below are some of the common allowances included in Flexible Benefit Plans:

Conveyance and Travel

Many companies provide allowances to cover the cost of commuting.

1. Fuel Allowance: If you own a car, you can claim reimbursement for fuel bills. This is tax-free up to the amount of valid bills submitted.

1. Driver Allowance: If you employ a driver, this cost can also be reimbursed.

1. Company Car: Some senior employees are provided with a company car. If used only for official purposes, it is tax-exempt, provided valid bills are maintained.

Telecommunication Bills

Allowances for internet, broadband, and mobile phone bills are very common. These are fully tax-exempt if you provide the bills, as they are considered necessary for work.

Food and Beverages

Employers often provide meal coupons or cards (like Sodexo). These are exempt from tax up to a specific limit (currently Rs. 50 per meal). For a regular working month, this can result in a tax-free benefit of roughly Rs. 2,200 per month.

Professional Development

To encourage learning, companies may offer an allowance for books, periodicals, and professional courses. If you pay for a workshop or buy technical books to improve your skills, this expense can be claimed tax-free.

Leave Travel Allowance (LTA)

Leave Travel Allowance (LTA) covers the cost of travel when you go on leave with your family within the country. It is tax-exempt subject to certain rules and submission of travel tickets.

Advantages of FBP

1. Tax Liability is Reduced: The biggest benefit is the ability to reduce your taxable salary. By claiming legitimate expenses, you lower the Net Taxable Income.

1. Personalised Salary: You can choose your pay package to your lifestyle. For example, if you do not have a car, you can opt out of the fuel allowance and allocate that money elsewhere.

1. Better Financial Planning: It forces you to plan your expenses such travel or education in advance, which can lead to better money management.

Disadvantages of FBP

1. Paperwork: You must collect and store bills throughout the year. If you lose a bill, you lose the tax benefit.

1. Lack of Portability: FBP benefits are specific to your current employer. You cannot transfer these benefits if you move to a new company.

1. Unclaimed Amounts: In some plans, if you allocate money to a component like a medical allowance but do not spend it, you might not get the tax benefit, and it will be paid out as a taxable allowance at the end of the year.

A Flexible Benefit Plan is an excellent tool for employees to maximise the take home salary by reducing the tax burden. By understanding the components and ensuring you maintain proper records of your expenses, you can claim the benefits of the plan.